Abercrombie & Fitch 2005 Annual Report Download - page 9

Abercrombie &Fitch
7
expanding the A&F business will be driven by opening select flagship stores combined with international
expansion. Late in Fiscal 2005, we opened the first Abercrombie & Fitch flagship store on Fifth Avenue in
New York City. The store performed extremely well, exceeding our initial sales productivity expectations.
We also opened our first Abercrombie & Fitch stores in Canada late in the year. The stores are off to an amazing
start with productivity above that of our average Abercrombie & Fitch stores in the United States. In addition,
we are planning to open flagship stores in the Grove at Farmer’s Market in Los Angeles in the Summer of
Fiscal 2006, followed by the London flagship store in the Spring of Fiscal 2007.
Our kids business, abercrombie, generated an incredible comparable store sales increase of 54% in Fiscal
2005. The abercrombie brand not only achieved the greatest productivity increase among our brands, but also
had a gross profit rate above both Abercrombie & Fitch and Hollister.
We are excited about the progress we have made in RUEHL, our newest brand. We ended the year with
eight stores, and are planning to open eight additional stores in Fiscal 2006. RUEHL performed well, achieving
solid productivity and gross margin improvements in Fiscal 2005.
Going forward, we remain committed to making appropriate investments in major areas of the business.
Initiatives to the stores’ organization in Fiscal 2006 will be focused on achieving an efficient relationship
between variable store expenses, particularly store payroll, and maintaining an in-store experience that
reflects the aspirational positioning of the brands. From an infrastructure standpoint, we will expand our
home office complex to support our growth initiatives. In addition, we plan to enhance our existing technology
platform by implementing systems intended to increase efficiencies by reducing manual tasks at both the
stores and home office.
After posting such exceptional results, we are faced with the challenge of reporting the same kind of growth
achieved in Fiscal 2005. Despite raising the bar higher, we believe that we can continue to report strong results.
While it is difficult to predict what business trends for Fiscal 2006 will be, we believe that the strength of our
brands and our ability to bring our stores and formats to new markets, combined with the improvements we
have made in a number of our disciplines, will enable us to continue to achieve growth in our sales and earnings.
In that regard, it is our intent to operate the business as we always have - striking that balance of reporting solid
growth for the short-term while continuing to enhance investor value for the longer term.
Michael S. Jeffries
Chairman and Chief Executive Officer